Question

I Header Foter Page Text Box WordA Number s, and improvements, choose Check for Updates. Type your response here: Calculation of expenses as % of total sales Jan- Feb- Mar- Apr- 1Ma Jun- Jul- Aug- Sept Oct- Nov-Deo- 14 14 14 14 y-14 14 14 14 -14 1414 14 actu actu actu actu actu actu Sales actu actu actu actu actu Revenu al a ala Inventor 32 30 35 32 32 30 32 37 28 32 32 32 Supplies 5 6 5 5 857 3 4 5 55 COGS 57 56 55 57 58 60 59 66 52 58 57 57 Operatin expense Salaries 20.0 19.5 18.3 17.1 17.0 17.1 17.0 15.9 16.7 16.6 16.4 15.3 Advertisi 0.62 0 0 00 0 0 0.54 1.48 1.6 1.53 1.27 Utilities 1.21 1.25 1.05 0.93 0.94 1.06 1.21 1.54 1.31 0.83 0.900/9 2 Insuranc 2.37 2.25 2.17 2.07 2.02 2.04 2.02 199 1.96 1.95 1.94 1.93 Repairs .25 0ー0ー0.05 0% 0.99 1.0619ー0 0ー0.36 13 24.4 23.0 21.5 20.8 20.0 21.2 21.3 20.0 21.5 21 21 19.6 TOE Income- 15.0 15.4 15.7 15.0 14.7 14% 14.3 11.9 16.8 14.7 T15- 15 Interest 1.95 1.85 1.78 1.70 1.66 1.68 1.66 1.63 1.61 1.6 1.601.59 7 taxes 5 0 5 5o 5 0 expense

Answer 1

Ans: Expense is related to sales when it increases or decreases with increase or decrease with sales.

Cost	Related to sales or not	Reason
Direct Cost ( Inventory, Labor and Supplies)	It is related with sales	This cost took place to convert inventory in to finished goods. So this cost always considered as related to sales.
Salaries	It is not related with sales	As it does not increase or decreases with increase or decrease with sales. This salaries may be paid to administrative staff.
Advertisement	It is not related with sales	As it does not increase or decreases with increase or decrease with sales. In some of the month it doesn't even occur.
Utilities	It is not related with sales	As it does not increase or decreases with increase or decrease with sales. for eg. March 2014 sales is $70,244 utilities cost is $740 and in April there is increase in sales to $73,440 but utilities cost reduce to $640
Insurance	It is not related with sales	It is type of fixed expenses which incur throughout the period with same amount
Repairs	It is not related with sales	As it does not increase or decreases with increase or decrease with sales. In some of the month it doesn't even occur.
Income tax	It is related with sales	As the sales increases or decreases Income tax increases and decreases. In the given case the Income tax rate is 35%.
Interest Expenses	It is not related with sales	It is kind of fixed payment irrespective of sales.

This bifurcation of cost in relation to sales help us in preparing budget for next year by allocation of cost as variable,fixed and semi fixed which help us to determine the desired sales we have to achieve to earn the desired contribution to meet the non sales related cost and to earn a desired profit .